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Don’t de­lay – look after your fam­ily with a life in­surance pol­icy...

Woman (UK) - - Ask The Experts -

All par­ents want to see their chil­dren grow up and flour­ish. the thought of not be­ing there and the im­pact that would have on them is al­most too un­pleas­ant to bear. one in 29 chil­dren lose a par­ent be­fore they grow up. i was one. and on top of the hor­ren­dous grief, as pro­saic as it sounds, there are of­ten se­ri­ous fi­nan­cial con­sid­er­a­tions, too.

when i meet a new par­ent at my tv road­shows they of­ten ask me about sav­ing for their chil­dren. i al­ways ask if they’ve got life in­surance. it is a cru­cial but of­ten over­looked fi­nan­cial con­sid­er­a­tion. we need to over­ride the emo­tion and ex­am­ine it clin­i­cally.

life in­surance is an in­surance pol­icy that’s de­signed to pay out a lump sum when you die – usu­ally ei­ther to clear debts, or pro­vide money to live off. there are three main types of poli­cies, other than in­vest­ment type life as­sur­ance plans:

1 Level-term life in­surance

this pays out a set amount if you die dur­ing a set time.

2 mort­gage de­creas­ing-term

life in­surance this aims to clear your mort­gage. so as your debt drops with time, so does the amount it pays out. 3 whole of life in­surance the pol­icy is mostly about mit­i­gat­ing in­her­i­tance tax costs.

Make your choice

the cheap­est way to pro­tect your fam­ily is with level-term

life in­surance. you pay a monthly pre­mium and it pays out a set amount if you die within a set pe­riod of time, for ex­am­ple £200,000 if you die within the next 20 years. the more cover you get and the longer the term you want, the more you’ll pay. and as the pay­out is fixed, then pro­vid­ing the com­pany is rep­utable, it’s usu­ally just a case of the cheaper the bet­ter. a rule of thumb is to cover 10 times the main bread­win­ner’s in­come. the aim is to have enough cash to cover the lack of in­come if you’re gone.

aim for a lump sum that’s enough to re­pay any debt, and pro­vide for out­go­ings your de­pen­dants would have. short­en­ing the term cuts the cost, though you’d want cover that lasts un­til chil­dren have fin­ished ed­u­ca­tion.

Get on­line

Slash £££s off the cost of level-term in­surance. never think of life in­surance as a monthly cost, you may be pay­ing it for 20 years, so ev­ery £1 a month cheaper is a sav­ing of £240. to find the cheap­est pol­icy see lifein­sur­ance, but in brief…

✱ com­par­i­son sites can be over-ex­pen­sive. they may find you the cheap­est pol­icy, but they also take a whack of com­mis­sion from the in­surer.

✱ if you don’t need ad­vice, use a dis­count bro­ker like cavendis­hon­ or mon­ey­ here you pay a fee of £25ish, but they re­bate all the com­mis­sion so it can be £1,000s cheaper.

✱ if you do need ad­vice, use an ad­vi­sory bro­ker or in­de­pen­dent fi­nan­cial ad­vi­sor. Find one at un­bi­ and vouched­

✱ write it in trust to pro­tect de­pen­dents from tax. if you die, the pay­out forms part of your es­tate and would be li­able for in­her­i­tance tax. how­ever if, when get­ting out a pol­icy, you write it ‘in trust’ to your de­pen­dents, it is paid di­rectly to them, so in­her­i­tance tax isn’t due.

Pro­tect your kids and buy some peace of mind

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